Do you plan on investing in a property right in Dubai? You are not alone. Investors from all over the world are intrigued by Dubai’s very active real estate market. Here is the catch: many first-time buyers will have to view the property at a specific price and be shocked by other hidden costs. Let’s dive into some of those ‘hidden’ costs and fees associated with buying property in Dubai so that one can budget wiser and avoid any surprises.
1. Government Fees-Not Just Buying Your Tags
The registration fee for the Dubai Land Department, or DLD, is the most significant chunk of your additional expenses. You are supposed to pay a share of 4% of the value of the property to keep it registered. This means that if you buy a property worth AED 2 million, that will be AED 80,000 immediately. You also have to pay the title deed issuance fee, which ranges between AED 540 and AED 4,000, depending on your property’s price. Such costs cannot be negotiated; therefore, they should form one of your first expenses when planning your budget.
Quick Estimate: Always budget for a minimum of 4 to 5% in such cases for government charges.
2. Realtors’ Commissions: Unsung Helper
When you go through an agent, you pay for his expertise, but this facility comes at a cost. Be ready to spend at least 2% of the price at which such a property was bought as his commission. If you Buy a property that costs AED 1.8 million, you will pay your agent AED 36,000. But this cost is only payable if you buy or sell property in the resale market. In the off-plan market, this cost is borne by the developer.
Pro Tip: Sometimes, commissions are negotiable, especially on high-end properties. So don’t hesitate to negotiate with your agent; it could save you thousands!
3. Loan Costs: How Much Does the Bank Take?
If you’re taking a mortgage, be prepared for a slew of bank charges: first, there is also a 0.25% mortgage registration fee charged by the DLD, determined by the loan amount. A loan of AED 1.5 million would add up to AED 3,750. Apart from that, there is a loan processing fee of 0.25% to 1%. That means one has to pay between AED 2,500 to 10,000 on a loan of AED 1 million. Banks also charge a valuation fee ranging between AED 2,500 to 3,500, which is the cost of evaluating the valuation of your property.
Caution: Add to your budget at least 1% of your loan value to pay for all these costs.
4. Annual Maintenance & Utility Setup Charges: Keep It On
In addition to owning your property in Dubai, you must pay annual maintenance service charges. These charges can vary from AED 15-50/square foot/ year, meaning that for a 1,200 sq. ft. apartment, anywhere between AED 18,000 and AED 60,000 per annum. Setting up your electricity and water connection with DEWA will also entail an upfront charge of around AED 2,000 – AED 4,000.
Note: The service charge is higher for premium properties due to the value-added to their amenities.
5. Cost of Insurance: Insurance for Peace of Mind
While not compulsory in Dubai, insurance is highly recommended to avoid potential risks to your investment. The most basic home insurance policies start from approximately AED 1,000 annually. Life insurance is often compulsory if financing is taken out; the cost typically ranges between 0.4 and 0.8 percent annually on your outstanding loan balance.
Pro Tip: Obtain quotes from multiple insurance companies for the best coverage and rates.
6. Initial Purchasing Costs: The Up-Front Costs
Other preliminary costs include lawyer costs: The fees are between AED 5,000 and AED 10,000. So, in the same instance of buying a property for AED 2 million, you will pay about 400,000 to 500,000, apart from the legal charges, as the down payment.
The first investments: Be ready since such first costs can prick several holes in many pockets. Therefore, it is vital to factor these into your financial planning already.
Wrapping Up the True Costs
Cost of Buying property in Dubai can be an exciting investment, but one has to realize there are so many hidden costs buried beneath the property’s sale price. Adding government fees, commissions to agents, charges related to a mortgage, and ongoing maintenance, most will find themselves shelling out 10 percent to 15 percent in addition to the property’s value for these hidden costs.
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